Open letter to Senator Bernie Madoff…I mean, “Sanders”

Recently on Facebook you stated, “Social Security is not going broke. It can pay out full benefits to every single retiree for the next 18 years.” You must have struck a chord among your readers, your post had over 74,000 likes and 17,071 shares.

You certainly have a way of speaking to issues and reaching the masses. You should have won the Democratic primary. The election was rigged; but, as you know, not by the Russians.

You’ve advised your followers not to believe what Republicans say about Social Security. I agree! They also shouldn’t believe Democrats. A better authority may be bureaucrats. Charles Blahous, for example, was a public trustee for Social Security and Mediacre from 2010 through 2015 (during President Obama’s administration).

In his book, Social Security: The Unfinished Work, Blahous writes, “In a ‘pay-as-you-go’ system, the government produces the revenue to pay benefits only as needed. This is essentially how Social Security works now.”[Page 123] He continues, “During Social Security’s infancy, there was an intense debate. But in due course, a consensus was reached to have a pay-as-you-go system…even after the 1983 reforms, the system effectively still remained a pay-as-you-go system, in the sense that no saving was being amassed to pre-fund future retirement benefits…it is less well understood that there was no intent in 1983 to depart from pay-as-you-go financing.”[Page 125]

Blahous distinguishes a pay-as-you-go system from a funded system. In a funded system, money is set aside to help pay for future cash flows. As a pay-as-you-go system, no money is reserved for future payments. Current taxes pay for current expenses. As you know, Senator, from the very beginning of Social Security, the public has been deceived. The current funding of Social Security payments rely on the current collection of taxes. There was never a strategy to prefund the cash flow need. This is the same strategy deployed by Bernie Madoff.

In a 2011 interview, Charles Blahous was asked to describe the difference between Social Security and a Ponzi scheme. He answered, “The difference is largely one of intent. Obviously, in a Ponzi scheme, you have intent to defraud.” [1] He saw Social Security having a nobler intent.

Andrew Biggs is a former principal deputy commissioner of the Social Security Administration. When he was asked to explain the difference between Social Security and a Ponzi scheme, he said, “Well, both are essentially transfer programs. A Ponzi scheme would promise a rate of return which mathematically is impossible to produce. Social Security can keep going by cutting the rate of return you get. It will be a much worse deal for those people retiring 50 years from now, than it was for those people retiring 50 years ago. So in that sense, it is sustainable.”[1]

In his book, Stress Test, former Treasury Secretary Timothy Geithner wrote, “In treating Social Security like a slush fund, the federal government has borrowed, spent and vowed to pay back the $2.5 trillion or so ‘surplus’ in payroll tax revenue it has siphoned out of Social Security. The money has been spent but the federal government has promised to pay it back.”[2]

Of course, you know all that. You also know the FDIC uses the same accounting method as Social Security. So when William Issac, former FDIC Chairman, testified to Congress, that there is no deposit insurance fund—it’s an imaginary fund, he was also confirming the non-existence of the Social Security Trust Fund. Issac told a congressional subcommittee in February of 2000, “The FDIC collect premiums (taxes, to be more precise) from banks and thrifts and turns them over to the Treasury…the Treasury computer duly records the payments made by the FDIC. The money…is spent on welfare, defense, education, and the like. Should the FDIC need money to handle a failure, the Treasury borrows the funds in the market. The outlay by the FDIC counts as an increase in the federal deficit.” [3]

Then, Senator, you will remember former President Obama told CBS Evening News, on July 12, 2011, “I cannot guarantee that those (Social Security) checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.” [4]Isn’t this another way of saying the Social Security Trust Fund has no value? Why, otherwise, would the 2011 debt ceiling need to be raised BEFORE Social Security checks could be mailed?

As you know, Social Security taxes are collected and added to the general budget. They help fund wars, welfare programs, education, bailouts and all other government spending. In return, just like the FDIC, the Social Security Administration receives an IOU. To redeem the IOU, the federal government has to borrow more money, increasing the annual deficit. Since 2010, the government has been borrowing money to fund Social Security checks.[5] Until a change is made, this borrowing will continue. As you know, this is not going to end well.

Senator Sanders, perhaps better than anyone else, you have the ability to truly fix Social Security. All you would need to do is explain Social Security has been a Ponzi scheme since the beginning. As now, an independent, you can blame both the Republicans and the Democrats for deceiving the American public. You can explain there isn’t any way to fix a Ponzi scheme. The sooner it is stopped, the better. You could also draw from your knowledge of socialism. You can remind people that eventually, socialism runs out of other people’s money. You could use Venezuela as a current example. You could explain how socialism has led to the collapse of Venezuela’s currency.

This could be your “born again” moment. You could teach people America’s current financial problems stem from central planning, not free market capitalism. You can explain, especially to snowflakes, America today is not a free market economy but, rather, a mixed economy. It is a mix of socialism and capitalism. This has been the case for at least 100 years. You can blame the progressives for this change in 1913, when income tax was solidified and the Federal Reserve was established. You can remind the Occupy Wall Street protesters, they should have protested Capitol Hill—the economic center of our financial problems.

Senator Sanders, it is unlikely you will have another opportunity to run for President. But, in the final phase of your political career, you can be a powerful change agent. Your legacy could be correcting the progressive misinformation campaign. It can start by telling the truth about Social Security.